Winter's Chill Sends Natural Gas Prices Soaring

Winter is coming, and with it, higher natural gas prices. The cost of natural gas has been climbing for a month now, hitting an eight-month high. Why? Because the weather is getting colder, and people are using more heat. It's simple supply and demand. You might think that more production would lower prices, but it's not that straightforward. The US is producing more natural gas than ever, with forecasts suggesting around 107. 67 billion cubic feet per day by 2025. But demand is also rising, and that's pushing prices up. Take a look at the numbers. On a recent Thursday, the US produced about 109. 7 billion cubic feet of natural gas, which is 7. 3% more than last year. But demand was high too, with 82. 7 billion cubic feet used. And let's not forget about exports. Liquefied natural gas (LNG) export terminals saw an 8. 9% increase in demand compared to the previous week. Electricity generation also plays a role. The Edison Electric Institute reported a 0. 12% increase in electricity output compared to last year, and a 2. 84% increase over the past 52 weeks. More electricity means more natural gas is needed to generate it. What about storage? The Energy Information Administration (EIA) reported that natural gas inventories increased by 33 billion cubic feet for the week ended October 31. While this met market expectations, it was below the five-year average. As of October 31, inventories were up by 0. 4% compared to last year and 4. 3% above the five-year seasonal average. So, there's enough gas in storage, but prices are still rising. Lastly, let's talk about drilling. Baker Hughes reported that the number of active US natural gas drilling rigs increased by 3 to 128, the highest number in 2. 25 years. In the past year, the number of gas rigs has risen from a 4. 5-year low of 94 rigs. More rigs mean more production, but as we've seen, that doesn't always mean lower prices.